The disclosure of market risk information under IFRS 7 – Evidence from Swiss listed non-financial companies

Von Stefan Hunziker

Studien- und Projektleiter sowie Dozent am Institut für Finanzdienstleistungen Zug IFZ

Risk management has become considerably more important during the last years. Especially due to the use of more complex and innovative financial instruments, the identification, valuation and controlling of risks arising from financial instruments became a major task of an internal risk management for industrial, commercial and service-sector companies. Under IFRS 7, companies need to prepare disclosures about their market risk exposure at balance sheet date. Yet, there is no empirical research about neither the format Swiss non-financial companies disclose these information nor what the implications of these disclosures for (potential) stakeholders are. The paper addresses this gap and explores market risk disclosures within a sample of 116 Swiss listed non-financial company annual reports using content analysis and correlation analysis. Sensitivity analysis is the prevalent method to disclose market risks. Significant associations are found between the number/amount of market risk disclosures and company size. Likewise a significant association is found between the number/amount of risk disclosures and the company’s risk proxied by the gearing ratio. No association is found between the number/amount of risk disclosures and the company’s performance, however. Overall the (potential) stakeholder may rely on disclosures under IFRS to assess about the market risks that origin from financial instruments.

For more information read the IFZ Working Paper No. 0020/2013.